This week promises to be a great big economic rodeo, with the stimulus bill moving forward-ish in Congress and Treasury Sec. Tim Geithner set to announce the latest, greatest plan for saving the banks.

Simon Johnson and James Kwak ring in today with a look at the latter, on their Baseline Scenario:

Our unsustainable debt-fuelled boom, in other words, produced both the conditions for a major global financial disaster, and a political strengthening of the people who benefited most from the risk-taking and associated compensation packages that made this disaster possible. Ending the financial crisis is relatively straightforward - a forced recapitalization and change of ownership/management in the banking system - although this will not immediately lead to an economic recovery (more on that here). But seen in deeper political terms, decisive action to restructure large banks is almost impossible. Such action would require overcoming perhaps the single strongest interest group in the United States today.

Johnson and Kwak offer strong medicine for doing that: break up the banks until they're no longer too big to fail. Johnson's coming to a Planet Money podcast near you; meanwhile, don't miss his and Kwak's explainer on national debt.

categories: Understanding The Crisis

11:40 - February 9, 2009

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